Describe the basic motives for businesses to merge. What will be an i

Describe the basic motives for businesses to merge.

What will be an ideal response?

ANSWER

Take advantage of synergies in operations: increase overall sales, reduce operating costs, lower costs of capital. Mutual acquisition of skilled managers, as each of the businesses may have skilled personnel that the other doesn’t possess. Take advantage of favorable tax consequences. Increase market power so as to enhance economic profits. Diversify to reduce business risk. Increase the compensation of top executives, although this often is at the expense of stockholders and other employees.